Q. If a nation’s economy is said to become tax buoyant. Which of the following statements is correct in this regard?

The government is getting most of its revenue from the imposition of direct taxes.

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Leakages in the country’s tax structure are manifold.

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Tax collection is in proportion to the country’s economic growth.

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The changes in tax revenue are in line with the changes in tax rate.

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Solution

The correct option is D
The changes in tax revenue are in line with the changes in tax rate.
Explanation:

In economics, the tax buoyancy shows the relationship between the changes in government’s tax revenue growth and the changes in the country’s Gross Domestic Product. Hence, it can be said that when a tax is buoyant, its revenue increases without increasing the tax rate by the virtue of economic growth.

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